2008 (7) TMI 941 - HC - VAT and Sales Tax

Whether the additions made on account of suppression of inter-State purchases and sales should be only for the value of actual suppression noticed or whether the assessing authority, after rejecting the books of accounts and the returns filed, could make further addition, apart from the actual suppression? Held that - In the instant case, the assessee had filed its annual returns and in that had conceded a particular turnover as total and taxable turnover. Before completion of the assessment proceedings, the check-post authorities had furnished the check-post declarations to the assessing authority in regard to the consignments received by the assessee. Since the assessee had not reflected in the books of account and also in the returns filed about the goods purchased under those check-post declarations, the assessing authority, after rejecting the returns filed by the assessee, has proceeded to pass best judgment assessment. The assessee, apart from denying the transaction, had not produced any other material by way of rebuttal evidence before the assessing authority. Therefore, the assessing authority has proceeded to accept the check-post declarations and has completed the best judgment assessment and while doing so, has made certain additions towards the probable omissions of sales and purchases. While completing the best judgment assessment, the basis that is adopted by the assessing authority is the transactions reflected in the check-post declarations. It is on rational basis that a best judgment assessment could be passed. The best judgment assessment passed by the assessing authority cannot be replaced by this court by yet another best judgment assessment unless the said assessment is wholly arbitrary and whimsical. Against assessee.

Summary

Issues involved:
Interpretation of law regarding additions on account of suppression of inter-State purchases and sales.

Detailed Analysis:
The High Court of Kerala addressed the issue of whether additions made on account of suppression of inter-State purchases and sales should be limited to the value of actual suppression noticed or if the assessing authority could make further additions after rejecting books of accounts. The Full Bench declared that once accounts are found to be incomplete due to material defects like purchase or sales suppression, the assessing officer can reject the books and estimate turnover according to statutory principles and legal precedents. The matter was referred back to the Division Bench for other issues.

The case involved an assessee registered under the Kerala General Sales Tax Act and the Central Sales Tax Act, dealing in grocery. The assessing authority rejected the books of account and issued a pre-assessment notice based on check-post declarations indicating probable suppression of purchases and sales. The assessee denied the transactions but failed to provide additional evidence. The assessing authority then completed a best judgment assessment, making additions to the turnover and tax liability.

The assessee challenged the order before the first appellate authority and subsequently the Tribunal, questioning the legality of additions based on check-post declarations without the opportunity to cross-examine consignors. The High Court considered relevant legal principles from previous cases and upheld the Tribunal's decision, emphasizing that a best judgment assessment can be based on rational grounds, such as transactions in check-post declarations. The court cited the precedent that its assessment should not replace the assessing authority's judgment unless it is arbitrary.

In light of established legal principles and previous court decisions, the High Court concluded that no interference with the Tribunal's order was warranted. The questions of law framed by the assessee were answered in the negative, against the assessee and in favor of the Revenue, leading to the rejection of the revision petition.

In conclusion, the High Court upheld the Tribunal's decision regarding additions made on the basis of check-post declarations, emphasizing the assessing authority's discretion in conducting best judgment assessments within legal boundaries and established principles. The court's decision was guided by statutory provisions and relevant legal precedents, ensuring a fair and lawful assessment process.